Analysing industry profitability: A “complexity as cause” perspective

SummaryWe investigate how the competitive complexity of an industrial sector affects its profitability. For that purpose, we developed a set of simulations representing industries as complex systems where different firms co-evolve linked by multiple competitive dimensions. We show that increases in the complexity of an industry, resulting from increases in the number of players and in the number of competitive dimensions linking them, damages industry performance. We also found that the negative impact on performance resulting from a higher number of competitive dimensions decreases as the number of players in the industry increases and that the decrease in industry performance associated to big increases in the number of players is mediated by the number of competitive dimensions linking them.